Smartphones are moving from a high-end luxury to a billion-unit-a-year business. Yet one of the fascinating things about the industry right now is just how many companies are in serious trouble, and how many things are totally uncertain. We could easily see a major handset brand get bought or just disappear in the next 12 months, but every single handset company faces fundamental and often existential questions:
Will Apple make a cheaper phone, moving below $600 new? How would it do it? (How) would it maintain segmentation? Would that be a $300 phone? A $100 phone?
Will Microsoft make its own phone? Will Windows Phone finally get any traction?
What happens to Nokia if Windows Phone gets no traction? What if it does? Does Microsoft buy it?
What is the future of Nokia's featurephone business? How big will Asha be?
How much longer will RIM survive? Who will buy the wreckage?
What happens to the struggling Android OEMs, HTC, LG and Sony? Is there an M&A roll-up here?
What is Google going to do with Motorola? Shut it down? Break it up? Let it carry on running into the ground? Or give up on the firewall?
Is Google's whole approach to Android sustainable? Will it move more towards Nexus handsets, or does that remain just a low-volume showcase?
Is Samsung's leading position sustainable?
Will the Chinese move up-market and become major consumer players in the West?
Will the Chinese try to buy a non-Chinese OEM? RIM? HTC? Would they be allowed to?
What is the future of the subsidy model? Will operators (and consumers) move decisively away from them? What would have to change to do that?
(late addition) Will Samsung remain committed to Android, refocus on Windows Phone, fork Android or all of the above?
(late addition) Will Amazon make a 'Fire Phone'?
(late addition) Will Apple's monopoly of the high-end ($600+) phone market continue, or will Android/Windows Phone improve to the point they can take it on head-to-head?
(late addition)Will Intel become relevant in mobile? Would it do a big acquisition? Panic and buy an Android OEM?
I have pretty considered opinions about most of these - but there are no clear answers to any of them. Massive amounts could change, quite easily, in the next year to two.
A little perspective on the ‘Microsoft’s wasted decade’ meme: revenue went up 6x in the 15 years after 1995, the year Windows 95 came out, which was arguably the company’s high point.
Of course, Apple’s revenue grew far more, and Apple has changed a great deal in the last decade, but equally important have been changes that have brought the market much closer to Apple. Apple has ￼always sold a product in which specifications were less important than design, quality and experience. In the past, the computer industry was a commodity bulk business in which design was irrelevant and technical specifications were everything, and purchase decisions were taken by IT managers who never even saw the devices. Microsoft sold the perfect product for that market, and Apple naturally remained a niche player.
Today, Moore’s Law has advanced to the point that increases in performance are much less noticeable: a 50% increase in CPU speed may be imperceptible to a typical user, and specifications are irrelevant to large parts of the market. This makes the other parts of the purchase decision much more important, and this is where Apple has always focused its efforts: design, experience and build quality.
The first manifestation of this was growth in laptops, which were 66% of Apple Mac unit sales in 2010 (and 72% in the 12m to June 2012), versus 30% in 2001.
Yet mobile and tablets are markets even better suited to Apple’s model than PCs. There is no locked-in Windows install base, while the purchase decision is entirely personal and highly dependent on the physical object and the software experience – the areas that Apple has spent 30 years focusing on and Microsoft deliberately sacrificed to achieve broader reach. Apple even has the advantage in marketing – it is possible to demonstrate the iPhone UI in a 30 second TV spot in a way that it is not possible to demonstrate the Mac OS.
In other words, you could argue that you should ignore the personalities. Both Microsoft and Apple carried on doing what they had always done at their best; what has changed is the market. That’s not entirely fair, but it’s worth considering.
Note: I made the chart for a report in 2011. I could update it, I suppose, but I can’t be bothered ;)
Microsoft’s launch event for the flagship ‘Surface’ Windows 8 tablet
I’ve been playing with the consumer preview of Windows 8 for a day or two now. Most of the online commentary on it that I’ve seen has centred on the jarring shift between the old ‘Windows’ UI and the new Metro UI, which reminds me somewhat of running DOS apps in a window on Windows 3.1 back in the early 1990s.
Certainly, the shift between the two is inelegant, but that’s perhaps a price worth paying for MSFT. They now have a UI model that works on PCs, 50”+ screens and tablets, not to mention phones. For the first time, the statement ‘you know how to use this phone because you know how to use Windows’ will be sort-of true. They’ll also achieve a step change in ease of use, a crucial response to the iPad challenge.
For the media companies that I do most of my work with, the really interesting thing is that Windows 8 combines the same app-store as route to market model (flawed though it is) that’s been so energising in iOS, with the new concept of live tiles, shown in the screen shot above. You can install a media company’s app and it pushes stuff right to your home screen, right next to your other programs. Once this starts arriving by default on the hundreds of millions of PCs that are still being bought out there, that becomes very interesting.
An idle observation: Windows Phone has an embedded Facebook client that forms part of the address book, home page and half the screens in the OS. Microsoft tries very hard to get you to enable it when you turn on your new phone.
According to Facebook, there are now 1.3m active users of this client: see here (yes, this is the integrated one, not the one you can download yourself)
This number has gone up by 300k since mid-November. I would suggest that this means it is very unlikely that more than, say, 3-400k Nokia Windows Phones have been sold in the last two months. Certainly, this data point would be impossible to reconcile with the rumours of of several million units that are floating around.
We might or might not find out whether I’m right on Thursday, when Nokia reports Q4 2011 results: it will be interesting to see if they disclose that data point.
Well, Nokia sold ‘well over 1m Lumias’. How interesting. Either the Facebook data is wrong (unlikely), or a very high proportion of people buying the devices don’t set up the built-in Facebook integration, despite that being a major selling point. Interesting.
I’ve been playing with one of the new Nokia Lumia 800s for the past few days (and tweeting a fair bit about it). It isn’t my job to do a ‘review’ - you can find dozens of those online, but I will say that the industrial design is as good as anything Apple has produced - perhaps better. The Windows Phone UI is very polished, though it lacks a lot of the incremental features that Apple and Android have accumulated over the last two years. Most importantly, it never once slowed down, whereas the reviews of the latest Nexus - a phone that Google specified and controlled to be a showcase - all mention ‘the typical Android lag’. I hate the PenTile screen though.
Of course, the two Lumias that Nokia announced last week are the first outputs of a crash program that we should expect to yield half-a-dozen more models in the next 12 months, and it is the totality of that portfolio that will determine Nokia’s survival.
Hence the key issues for now are things like the retail and operator ranging outlook, the lack of a US launch until 2012 and the lack of a low-end model (the cheapest Windows Phone Nokia so far is €270 pre-subsidy where you can buy a decent Android phone for $150 and a working one for $100). The app experience is actually surprisingly good. Though Windows Phone lacks the apps that you’re used to if you’re coming from Apple or even Android, if you come to it from RIM, Symbian or a featurephone you’ll be dazzled by all the great stuff that is there. Microsoft appears to have taken two or three dozen best-selling games for iOS and ported them to Windows Phone, a very sensible move. I’ve written a ‘proper’ report on all these issues and more for Enders Analysis.
However, I also wanted to point out that there’s a hidden value partner here: Facebook. This is effectively a Facebook phone: your address book, messaging and photos effectively ARE your Facebook content. The video below explains this better than I can - 9/10 of the value of your day-to-day experience is the deep integration of Facebook (and also twitter and LinkedIn) with your phone.
What does this mean? First of all, it is much easier for Google to get web search onto a Windows Phone device than it is for it to get Google Plus onto that device. There is a hard-coded Bing Button on the phone, but you can easily pin Google to your home screen. But Google Plus posts won’t show up next to my friends’ names unless Microsoft puts them there. Google’s fear of being blocked from mobile devices, which prompted Android in the first place, is becoming just a little more real.
Maybe, apps are not the lock-in that we tend to assume.
I have a LOT of iPhone apps - iTunes tells me I’ve downloaded 493, many of which I have no memory of (according to Apple cumulative app downloads/total iOS devices sold is 72, though this is a blended figure). But many, perhaps most of my apps are either free or disposable.
On one hand, there are essential utilities such as Dropbox, Evernote, Amazon or, yes, Facebook. These are free and cross-platform. So long as I switch between mobile platforms big enough to be supported by these services, many of the apps that are most crucial do me on a day-to-day basis do not lock me in to any given platform.
On the other hand, there are lots of paid apps, especially on iOS. If you divide cumulative gross app revenue on iOS (which Apple discloses, sort of) by total device sales you get to an average of $16 per device.
But again, at least half of these are games, and most of the games that I’ve bought I don’t really want to play again after a few months, and so I don’t care that, a year later, I won’t be able to use them on my new phone. So it seems to me that most games are essentially disposable. The exception are social games - but of course many of those or will be cross-platform too, with my achievements following me from client to client. So, no lock-in here either, perhaps.
I don’t want to over-state the case - clearly there are many paid, essential apps that are only on one platform and may well lock people in to that platform. But for a lot of people, the sacrifice of apps that they must make when they switch platforms could actually be pretty small. Conversely, switching social network is vastly harder, especially if it’s deeply integrated into my phone, and Google Plus isn’t.
So all those people who are talking about how Nokia has sold its soul to Microsoft might be missing the point - actually, Microsoft sold it to Facebook.
There’s a big difference between making a great concept, free from the constraints of what’s actually possible given technology, economics and industry structure, and shipping a product that’s stepped through a door from the future. Compare Microsoft Office with Apple’s Siri.